I was shocked to read the small print on the Wonga.com ad. They offer short-term loans at an astonishing APR of 2689%. That’s right, I haven’t missed a decimal point. It’s an interest rate of two thousand, six hundred and eighty-nine per cent over a year.
Every lender has to quote the APR, by law. It’s supposed to be a standard measure for consumers to judge one loan against the next. But it doesn’t apply to short-term loans that are supposed to be repaid within a few days.
The company would quote their real interest rate over 1 week to be more like 7% (cheaper than a bank loan).
The point is, if you don’t pay it back on time, you’re stuffed.
Lasting Power of Attorney · September 8, 2010 at 12:51 am
While some unfortunate souls might do it, these pay day loans as they are known, were not designed to be carried over beyond a few weeks. I would tend to liken these loans to taking a taxi, only good for short trips – taxi from Holborn to King's Cross – sensible; taxi from King's Cross to Glasgow – not to be recommended. It just goes to show the APR is perhaps not a reliable indicator of whatever it was intended to measure.
Jackie Barrie, Writing Without Waffle · September 8, 2010 at 7:12 am
Good analogy, thanks.
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